Opinion
No. 42982.
March 7, 1938.
John J. Cunneen, of New York City (William J. Dodge, of New York City, on the brief), for plaintiff.
John A. Rees, of Washington, D.C., and James W. Morris, Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Suit by Worden Co., Inc., against the United States to recover an amount with interest claimed to have been illegally collected by the defendant as a corporation income tax.
Petition dismissed.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
1. During the calendar year 1929, the plaintiff was a New York corporation, with its principal place of business at 10 East Fortieth street, New York, N.Y. It was organized as a corporation under and by virtue of the laws of the state of New York on October 24, 1921, and was dissolved in accordance with the laws of that state on December 20, 1929.
At the date of dissolution there were outstanding 400 shares of capital stock, of which one share was then owned by Guy W. Renyx and the remaining shares were then owned by Flora R. Renyx, his wife. Plaintiff's directors on the date of dissolution were Flora R. Renyx, Guy W. Renyx, and Herbert S. Duncomb. The latter resigned as a director on January 11, 1930.
The Guren Company was likewise a New York corporation organized September 30, 1926, with its principal place of business during the year 1929 at 10 East Fortieth street, New York, N Y
Both of these corporations were organized for the purpose of engaging in the business of organizing and financing commercial enterprises and to purchase and sell securities and real estate in connection with such activities.
The Guren Company was a wholly owned subsidiary of the plaintiff corporation during the year 1929.
2. On March 15, 1930, the plaintiff filed a tentative consolidated corporation income tax return for the calendar year 1929 for itself and for its subsidiary, the Guren Company. That return contained no figures whatsoever and merely reported "no tax." In a letter addressed to the Collector of Internal Revenue for the Third New York District, plaintiff asked for an extension of time within which to file a completed return for itself and for its subsidiary. In a letter dated April 11, 1930, the collector of that district granted an extension to May 15, 1930.
On May 15, 1930, plaintiff filed a completed consolidated income tax return for itself and for its subsidiary for the calendar year 1929, reporting thereon a total net income of $155,315.22 and a total tax thereon of $17,084.67. In a schedule attached to that return, the net income so reported was computed as follows:
Loss.
The tax so reported in the sum of $17,084.67, together with accrued interest of $42.61, was assessed by the Commissioner of Internal Revenue on the May, 1930, list, account No. 320006, signed August 14, 1930. This tax was paid in installments as follows:
May 16, 1930 .............. $ 4,313.88 June 18, 1930 ............. 4,271.17 September 15, 1930 ........ 4,271.17 January 12, 1931 .......... 4,271.17 __________ Total .................. $17,127.39
3. The Commissioner of Internal Revenue on the May, 1930, list assessed additional interest against plaintiff of $35.73 for the year 1929. On this item of interest, the plaintiff by Guy W. Renyx on December 7, 1931, filed an offer in compromise in the sum of $18, giving as grounds for acceptance the following: "Worden Co., Inc., are virtually out of business and I have no funds. They have not paid the State Tax, but I, as one of the Officers of the Defunct Corp., am submitting this offer so as to close this matter."
In the printed portion of the blank form appears the following: "In making this offer, and as a part of the consideration thereof, the taxpayer hereby expressly agrees that all payments and other credits heretofore made to the account(s) for the year(s) under consideration, for which an unpaid liability exists, shall be retained by the United States. * * *"
This offer in compromise was approved by the Secretary of the Treasury on February 3, 1932.
4. During March, 1931, a revenue agent made an examination and an audit of the books and records of the plaintiff and its subsidiary for the taxable year 1929. He prepared a report, dated March 12, 1931, a copy of which was furnished to the plaintiff on April 13, 1931, recommending, among other adjustments, an elimination from the income reported upon plaintiff's 1929 return of the first item shown in the computation in finding 2 hereof as "commissions, $250,000.00," upon the ground that these commissions and income properly constituted the personal income of Guy W. Renyx, who, during the taxable year 1929 was an officer and director of the plaintiff corporation. On May 13, 1931, plaintiff filed a sworn protest against the adjustment proposed by the revenue agent.
The Commissioner of Internal Revenue subsequently considered the revenue agent's recommendation and plaintiff's protest and determined that the item of $250,000 reported as income by the plaintiff constituted income properly taxable to Guy W. Renyx, individually.
5. On December 1, 1931, the Commissioner of Internal Revenue mailed a registered deficiency letter to Guy W. Renyx, proposing to assess an additional tax against him of $58,468.74, the greater portion of which was attributable to the inclusion of the $250,000 item of commission in his individual income.
6. In accord with the statutes made and provided in such cases, Guy W. Renyx filed a petition for redetermination of the proposed deficiency with the United States Board of Tax Appeals, docket No. 61559. In the petition Guy W. Renyx contended that the plaintiff was liable for the amount of income tax payable upon the item of $250,000 commission which it had already reported in its corporate income tax return and paid the proper income tax thereon.
In due course the proceeding before the Board of Tax Appeals was called for hearing, the petitioner therein, Guy W. Renyx, appearing pro se. Subsequently, the Board affirmed the deficiency proposed by the Commissioner of Internal Revenue (which was based upon a taxable net income that included the item "Commissions $250,000," as aforesaid) and entered an order accordingly.
7. The deficiency for 1929 against Guy W. Renyx determined in the proceeding before the Board of Tax Appeals, as aforesaid, together with interest of $10,726.21, was assessed in April 1933, and subsequently abated in full for the reason that it was found to be uncollectible. Demand was made upon Guy W. Renyx for payment of the amount so assessed, but he never paid it.
8. On January 15, 1932, the Commissioner of Internal Revenue sent to the plaintiff the following letter:
"Your income tax assessed for the year 1929 appears to be $17,084.67 in excess of the amount due, for the following reasons:
"Commissions received on sale of stock of Colonial Finance Trust reported as income by the corporation held to be income of Mr. Guy Renyx.
"The limitation imposed by law is about to expire as to one or more of the years involved, after which a refund or credit can not be made of any amount ultimately found to have been overpaid unless a claim is filed before the expiration of such limitation. It is therefore suggested that you prepare a claim upon the enclosed Form 843, specifically setting forth in such claim the grounds or basis of the apparent overpayment as above indicated. The claim should be properly signed by a duly authorized person and sworn to before a notary public (or other officer authorized to administer oaths for general purposes) and should be filed immediately with the Collector of Internal Revenue for the district in which the tax was assessed or paid. The accompanying copy of this letter should be attached to the claim when filed."
Two forms 843 were enclosed with the letter.
On February 11, 1932, Guy W. Renyx on behalf of the plaintiff filled out exactly alike the two forms 843, claim for refund, enclosed with the letter referred to above, and each was signed and sworn to by him before a notary public, and in support of the claim gave the following reasons: "This claim is filed pursuant to Letter IT: AR: A-5-RCH form 1405M, dated January 15, 1932. It is claimed by the Treasury Department in a deficiency notice addressed to GWR, dated Dec. 1, 1931, that the Commission earned is earned by GWR. The deficiency is contested by undersigned."
9. What purports to be a copy of the claim for refund prepared by plaintiff was introduced in evidence. The basis of this claim was the assessment referred to in the Commissioner's letter of January 15, 1932, and Guy W. Renyx testified that he mailed the original addressed to the Internal Revenue Department, Customs House, New York City (in which was the office of the Collector of the Second District of New York) on February 11, 1932. But the preponderance of the evidence shows that neither the claim nor the letter which Renyx testified he sent with it was ever received by the Collector of the Third District of New York, or by the Collector of the Second District of New York, or at the office of the Bureau of Internal Revenue at Washington, D.C., or filed in any of these offices.
10. No part of the sum of $17,127.39 collected from the plaintiff as federal income tax and interest thereon for the year 1929 has been repaid.
This suit is brought to recover $17,127.39 with interest claimed to have been illegally collected by the defendant as a corporation income tax for the year 1929.
One of the defenses set up in the case is that no claim for refund was ever filed as provided by law. Guy W. Renyx, one of the directors of the company, testified that he prepared and mailed a claim for refund to the Collector of the Second District of New York on February 11, 1932, but his testimony was given more than three and a half years after that date and it is not uncommon in future years for a person to imagine that he performed an act which he intended to do. The claim should have been sent to the Bureau of Internal Revenue at Washington, D.C., or at least to the Collector of Internal Revenue of the Third District of New York, where plaintiff had filed its income tax return and paid its tax. There is no record in the office of the collector of either the Second or Third Districts, or in the Bureau of Internal Revenue at Washington, D.C., of any claim ever having been filed. Among the files of the many thousands of cases presented to the Bureau of Internal Revenue incidental papers are sometimes lost, but the evidence shows that, when a claim for refund was received at the offices of the collectors mentioned above, a number of notations were made, certain proceedings were had, and the claim was transmitted to the office of the Commissioner of Internal Revenue where it was filed and a further record made. Under these circumstances the commissioner of this court in effect found that no claim was ever filed, and we think it evident that the preponderance of the evidence shows that his conclusion was correct.
Having determined that no claim for refund was ever filed, it becomes unnecessary to consider the other defenses set up by the defendant. The petition must be dismissed and it is so ordered.